In the U.S., people are on the move, and more of them are moving out of New Jersey than any other state. According to a recent study by moving company United Van Lines, about two-thirds of New Jersey moves are outbound.
(On the flip side, Vermont has the highest percentage of inbound moves at 73% — must be all that maple syrup.)
Whether you’re moving between states or just across town, the transition can be stressful, especially if you’ve purchased a new home before selling your old one. With two mortgages to pay, you may be looking for ways to trim costs, but one thing you shouldn’t skip: homeowners insurance on the house you just moved out of.
Why you shouldn’t cancel yet
Anything could still happen to the property. You still own that home, and you’re still responsible for any destruction or loss, such as a flooded basement or tree damage from a storm. “Never think that something can’t happen to you,” said Andrew Helling, a real estate agent in Omaha, Neb., and owner of REthority.com. “We’ve heard of homes burning down the day before closing. You wouldn’t want to be that homeowner.”
Keep in mind, too, that since you’re not there to keep an eye on things, you won’t be able to catch everything. If your furnace fails and your pipes freeze — and burst — it could be days before someone notices and the damage could be severe.
The savings would be minimal. The average annual cost of homeowners insurance is $1,083 nationwide, so if you sell the home within two months, you would only save around $180. Helling suggested that if your house is destroyed, you’ll be out the full price and a minimal savings may not be enough to justify that risk.
You’re still liable for injuries that might occur. If there are still potential buyers touring your house, there’s a chance for someone to get hurt on your property. “You’ll have a real estate agent there, and people who could trip and fall and sue you,” said Loretta Worters, spokesperson for the Insurance Information Institute. “You want to make sure you have protection and that there is an overlap.”
Your mortgage likely requires it. Most lenders mandate that as long as you hold a mortgage on a property, you must have it insured. So unless you’ve paid off your home and you own it free and clear, you’re probably obligated to continue to carry coverage. “Don’t stop your old policy based on a future closing date, because those dates can change on a dime,” said Ben Mizes, a licensed real estate agent in Missouri and CEO of Clever Real Estate.
Should you wait to sell your current home before buying a new one?
This answer depends on the real estate market. Currently, it’s a seller’s market, because demand is outpacing supply. That means that it’s harder to buy a house than it is to sell one, and you should always do the hardest part of the equation first. In other words, it’s fine to buy the new house first if the market supports it.
“If you sell your home and you can’t find another one, you’ll be in a little bit of a pickle,” Helling said. “A lot of the higher-end homes are sitting on the market for longer, but starter homes and middle-range homes are flying off the shelves, so you usually don’t have trouble finding a buyer. Where you run into problems is finding a good house to upgrade to.”
Buying new insurance
It may also be advisable to explore bundling insurance policies in your new area. The National Movers study found Florida to have over 55% new inbound movers. New Florida residents could benefit from bundling policies to help reduce the annual costs of home insurance. This also can impact your auto insurance policy, which averages $1,098 annually in Florida.
It’s also always a good idea to get a few quotes on homeowners insurance when you get a new policy. Your old insurer may not be the best choice for your new address or may not even offer coverage in your new area, depending on where you moved. You may also get better rates from a new provider. Get at least three quotes for comparison.
When to cancel your policy
You can cancel your policy once you no longer own the home. That is, once you’ve attended the closing and all parties have signed the documents and ownership has been transferred to the new buyers — then you can call your insurer and stop coverage.
In the meantime, if your home is vacant, you may want to ask your insurer whether you need to change coverage. “Most of the time, a homeowners policy is only valid if the homeowner is home, living in the home,” said Michael Bell, an agent in sales at Sotheby’s International Realty in Pasadena, Calif. “Many insurers will limit the amount of time your home can have coverage as vacant, after which they will either cancel coverage, or require an amendment to the policy or a completely new policy.”
If the cost bothers you, consider negotiating with your home’s buyers to pay the insurance premiums until the close. “In a hot market, sellers can often pass along more fees to the buyer,” Helling said. “See if your buyer will cover the cost.”
Unless you own your home (no mortgage) and you’re willing to shoulder all the risk of having an uninsured structure worth hundreds of thousands of dollars, you should keep coverage on the house until you’ve sold it. Canceling your policy before someone else buys the home could cause problems with your mortgage lender or big losses if something happens to the property.
“You are always best off with insurance,” Bell said.